Requirement of Furnishing Details of Assets & Liabilities in New ITR Form for A.Y. 2016-17
The Government has notified the New ITR Forms for the Financial Year ended 31st March 2016. The Income Tax department notified a new set of nine income tax return forms for assessment year 2016-17. A finance ministry’s gazette order said that taxpayers can file their ITRs by July 31, 2016.
The CBDT has issued a release that “With Assessment Year 2016-17, individuals and HUFs filing their returns of income in ITR-1, ITR-2, ITR-2A and ITR-4S, having income exceeding Rs50 lakh will now be required to furnish information regarding assets and liabilities in Schedule-AL of the relevant ITR form,”
With the passage of Finance Bill, 2015, wealth-tax is no longer leviable with effect from assessment year 2016-17. Taxpayers are, therefore, not required to file a wealth tax return from assessment year 2016-17 onwards. While abolishing the charge of Wealth-tax, the Finance Minister also announced that information which was required to be furnished in the return of wealth will now form a part of the Income-tax return.
For the purpose of detailed to be furnished lets divide tax payers in to two categories:-
· In the first category are the individual and HUF who are neither partner nor have any proprietary business or profession. These taxpayers can file their income tax returns in ITR 1, 2A, 2 and 4S depending on the nature of income. They have to submit details of immovable assets like land and building in addition to submit details of some specified movable assets like cash in hand, value of jewellery and bullion. The details of vehicles, aircraft, yatch and boats are also required to be furnished in the ITR. The amount of liability incurred against any of these assets is also required to be disclosed in the schedule of assets and liabilities
While individuals and HUFs with income above a specified limit, filing returns in ITR-3 and ITR-4 were already required to furnish information of their assets and liabilities in their annual return of income, now even individuals and HUFs not having income from business and profession would be required to furnish the details if their income exceeds the specified limit.
· In the second category are the individual and HUF tax payers who have business income either as a partner of a partnership firm or as proprietor of any business or profession. For the taxpayers in the second category, who have to file either ITR 3 or 4, in addition to the above details have to furnish details of some additional financial assets like deposits in any bank account whether fixed deposit or current account or saving bank accounts. They also have to provide details of cost of insurance policies, loans and advances given and investments in shares and securities. Additionally they have to provide details of archaeological collections, drawings, paintings, sculpture and any work of art.
1. People who are taxed under presumptive taxation scheme for their business of professional income, where a certain percentage of gross receipt is presumed to be the income or tax is payable at certain fixed percentage of the gross receipts, are included in the first category.
2. The tax payer has to provide the cost of these assets in case the same are not reflected in the balance sheet of the partnership firm in case of a partner and in the balance sheet of the proprietor business or profession.
WEALTH TAX RETURN VERSUS NEW INCOME TAX RETURN:-
1. Wealth tax was levied @ 1% on net wealth in excess of Rs 30 lakhs. However, there is no tax has to be paid on the net wealth declared in the income tax return forms.
2. Wealth tax return forms (Form BB applicable from assessment year 2014-15) were more detailed, requesting address of properties, name of valuer, weight, description of jewellery owned, including details of agricultural property, further, breakup of deposits held with banks, investments in bonds, debentures, shares, postal savings and loans advanced etc had to be provided. But the schedule AL is condensed & short as compared to the wealth tax return form.
with the abolition of wealth tax, people may take a relook at their wealth portfolio. They may now invest more in land in urban areas and other assets that were earlier subject to wealth tax. Holding more than one plot of land in an urban area will be free from wealth tax and would attract capital gains tax upon sale only. At the time of the sale, the taxpayer will be able to reduce his I-T liability by investing in a residential house or specified securities and bonds provided the property was held for 36 months.
While the finance minister announced tax exemption for three years for startups in the Budget, the Income tax department has introduced a separate column for earnings made from the same. The ITR-2A has a new section called Pass Through Income (PTI) and seeks details from business trust or investment fund as per section 115UA and 115UB of the I.T. Act. While it pertains to emerging firms and start up, these sections provide a tax pass through and the income is taxable in the hands of investors instead of VCF / VCC
There are many problems in mandatory disclosure which are discussed below:-
1. Since all these assets are required to be stated at cost, the tax payers may find it difficult to find out the costs of the Assets in case the same have been purchased long back and the cost details are not readily available with the tax payer. In many cases, the cost of the assets is unknown. In case of immovable assets, the cost is usually properly documented but in case of movable assets like Jewelry which is gifted to you by your parents , the cost of such assets may or not be known.
2. In case you have made advanced payment for purchase of capital assets before the end of the year would this be shown as an assets or a liabilities for an asset yet to be purchased.
3. Likewise for items like life insurance policies it may be difficult for the tax payers to arrive at the cost of the insurance polices because even the tax payers who maintain books of accounts the amount of life insurance premiums paid is generally debited to the capital account. In case of multiple insurance policies where some of the insurance policies might have matured it is difficult to identity the premium with the pending policies in casesuch break up is not of old payments of premium is not available.